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Tata Motors’ Stock Continues Fall Over Fears Of Downgrade By Fitch

Tata Motors Ltd.’s share price fell as much as 3.2 percent in opening trade today after Fitch Ratings added the company to its negative watch list, following profitability concerns of its subsidiary Jaguar land Rover.

The stock had ended 17.58 percent lower on Friday, clocking its worst single-day fall on the National Stock Exchange, after reporting the biggest-ever quarterly loss in India’s corporate history.

Fitch’s report highlighted that growing uncertainties around a hard Brexit may significantly dent its profit. “Fitch Ratings has placed Tata Motors’ Long-Term Issuer Default Rating of 'BB' on ‘Rating Watch Negative’ to reflect the increasing risks of a disorderly Brexit for its fully-owned subsidiary Jaguar Land Rover Automotive,” it said in a statement.

Nearly 80 percent of the business for Tata Motors’ Jaguar Land Rover comes from the U.K. and Europe, as per the company’s filings. A disorderly Brexit would shoot up the Tata Motors’ costs, cutting into its profits and increasing leverage, Snehdeep Bohra, associate director of corporate ratings at Fitch Ratings told BloombergQuint.

Another area of concern is Jaguar land Rover’s plummeting sales in China which includes challenges regarding the industry’s shift away from vehicles powered by gasoline and diesel—a stronghold for the company.

If JLR is not able to turnaround its business in China, that would be a major deterrent to their rating, Bohra said, adding that the key focus now is "the speed at which they can move away from diesel in China and how fast they can improve their business in Europe.